RT Journal Article
SR Electronic
T1 Portfolio Size
JF The Journal of Investing
FD Institutional Investor Journals
SP 31
OP 37
DO 10.3905/joi.2002.319522
VO 11
IS 4
A1 Robi Elnekave
YR 2002
UL https://pm-research.com/content/11/4/31.abstract
AB The number of holdings in a portfolio plays a significant role in capturing the excess return of an active management strategy. Portfolio size also has a considerable impact on variability of the outcomes—minimizing the tracking error between the portfolio and the strategy. Yet the number of positions held in a portfolio is seldom arrived at through deliberate study. The author analyzes the size question from three perspectives: as a statistical sampling problem, as the outcome of a fundamental law of investing, and as the result of iterative simulations. The results demonstrate the importance of actively selecting the number of holdings for a given strategy.